Skip to main content

Workers assemble a vehicle at Ford Motor Co.’s Oakville plant.

FORD MOTOR CO./THE CANADIAN PRESS

The federal government is setting aside $250-million for car companies and their suppliers, its first auto-subsidy program since the industry bailout in 2009 and a signal that Ottawa will keep offering money to sustain automotive jobs in the country's manufacturing heartland.

Prime Minister Stephen Harper announced at a Ford Motor Co. plant in Oakville, Ont., on Friday that the government will renew the five-year Automotive Innovation Fund it established in 2008. The original fund, which required companies to invest their own money to access government cash, helped generate $1.6-billion of research-and-development and innovation projects, senior government sources said.

"The Automotive Innovation Fund has a proven track record of generating results for Canadians in terms of jobs, prosperity and foreign investment in Canada," Mr. Harper said in a statement Friday.

Story continues below advertisement

The five-year renewal comes amid a controversy over government assistance to the auto industry, after the announcement by General Motors of Canada Ltd. in late December that it will shift production of the Chevrolet Camaro from Oshawa, Ont., to a plant in Michigan in 2015.

The federal and Ontario governments contributed $10.6-billion to the bailout of General Motors Co. during the 2009 recession, when the company restructured under court protection.

While GM has promised it will meet production commitments it made to governments in return for that money, the Camaro decision threatens the long-term future of several thousand jobs in Oshawa. Federal Industry Minister Christian Paradis said last month the company owes Canadians an explanation for the planned shift.

Ottawa is renewing the fund to help the auto-manufacturing sector remain competitive and protect close to 500,000 direct and spinoff jobs linked to the auto industry, government sources said.

"Our Conservative government remains focused on creating jobs and keeping Canada's automotive-manufacturing sector globally competitive and growing," a senior government source said. The money is to go to research-and-development projects.

Auto makers in Canada and parts suppliers are humming as the U.S. auto recovery picks up steam. That market is the destination for about 80 per cent of the vehicles assembled in Canada, while U.S. assembly plants are the biggest customers for Canadian parts makers outside their home country.

But the industry's long-term competitive position is being eroded by the high value of the Canadian dollar, which makes it more expensive to assemble cars here. Last year, the Canadian divisions of the three Detroit-based auto makers negotiated new contracts with their unions that included a wage freeze and concessions on the employee pension plan.

Story continues below advertisement

In addition, the federal and Ontario governments are competing for investment – in new plants and existing factories alike – with southern U.S. states and Mexico, which are throwing hundreds of millions of dollars worth of subsidies at car companies.

The governments and industry executives have watched a torrent of grants, loans and other assistance turn Alabama, Mississippi and other states into Detroit South in the past decade, and give Mexico such a boost that that country now surpasses Canada in annual auto production.

Since 2000, Canada has added one new assembly plant – a Toyota Motor Manufacturing Canada Inc., factory in Woodstock, Ont. – while GM, Chrysler Group LLC and Ford Motor Co. have closed five.

Those four companies and Honda of Canada Manufacturing, however, have spent billions of dollars upgrading other facilities in Canada.

The announcement is being made while Ottawa and the Ontario government study a request from Ford for more than $400-million in financial help to redevelop the assembly plant where Mr. Harper is scheduled to make the announcement. Ford Motor Co. of Canada Ltd. has not been notified by the federal government of any decision regarding that proposal, spokeswoman Lauren More said Thursday.

The Canadian Automotive Partnership Council, an industry-union-government group that makes recommendations on auto policy, has been a strong proponent of incentives. Group chairman Don Walker, who is also chief executive officer of auto parts maker Magna International Inc., has pointed to the thousands of spinoff jobs and billions of dollars in tax revenues created by auto plants as a key reason for Canadian governments to offer incentives.

Story continues below advertisement

Magna employees, for example, paid about $2.4-billion in income tax and employment insurance and Canada Pension Plan premiums over the past 10 years, Mr. Walker said.

The "primary reason we are here is because assembly plants are here and once they are gone, they don't come back," he said. "Governments around the world support their auto industry because they realize the importance to the economy. Many of them do whatever it takes to keep manufacturing healthy. This should be no different for Canada."

(Editor's note: An earlier online version of this story incorrectly stated the time duration of payments by Magna employees.)

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter